RBI has not touched the repo rate: Why banks should step up

The demonetization drive undertaken by the government of India is yielding some unexpected results. The Reserve Bank of India (RBI) has now stated that it will not cut the repo rate any further till it is able to access the impact of the drive on the economy of the country. In its sixth bi-monthly review, the RBI has held the repo rate at 6.25%. This comes as a surprise as many leading economists in the country had expected the RBI to cut the rate by 25 basis points and bring it down to 6%.

Besides factors such as inflation and global factors as such the crude oil prices, the central bank has said that the demonetization has had an impact on its decision to hold the repo rate. The demonetization drive was a step taken by the government of India to tackle the spectre of corruption and black money in the country. In order to do this the government had to take certain steps which curbed the flow of cash. The concern is that these steps might actually take a toll on the economy of the country and this is why the RBI has stopped itself from going for a rate cut.

The repo rate has a direct bearing on car loan and home loan EMIs. To put it in layman’s terms, the repo rate is nothing but the rate at which the central bank lends to all the other banks. So if the repo rate goes up naturally the interest levied on the loan will go up and if it comes down the interest rate has to come down. But most times the banks are quick to raise the interest if the repo rate goes but are unwilling to pass on the benefits of the rate cuts to the buyers. The RBI has time and again warned the banks to pass on the benefits but they seldom seem to listen to this entity.

So considering the rate cut has not happened is it a good time to buy independent houses for sale in Hyderabad or villas in Hyderabad? Well you should not be too disheartened by the central monetary agency’s stance. The banks might still lower their interest rates. This is also thanks to demonetization. The banks which might have been cash strapped before demonetization are today overflowing with it. This has made the banking environment quite a competitive one. Several of the banks have cut the interest rates all on their own. And further cuts are expected in the future as well. So if you are cautious and well informed then you might be able to buy independent houses for sale in Hyderabad or villas in Hyderabad for an affordable price.

The RBI may or may not slash the repo rate in the days to come. It has already cut it by 175 basis points in the last two years. It is up to the banks to ease the burden of the end user and further lower their interest rates.



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